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<FONT
size=3>And when no hope was left inside,
On that stary-stary night...
<FONT
size=3>
<FONT
size=3>Sunday March 18, 9:09 am Eastern
Time
Is the Fate of the Markets Written in the Stars?
By Hament Bulsara
LONDON (Reuters) - Finding it difficult to forecast financial markets in
their current state of flux? Maybe it's time to ditch your economic model and
start looking to the heavens.
Some investors are turning to astroeconomics, the art of using astrological
cycles to predict financial asset prices, in deciding where to put their money
-- and other people's money.
``Astroeconomics is like technical analysis 30 years ago. People were using
it and nobody talked about it,'' says Henry Weingarten, a financial astrologer
turned money manager. ``It's a fairly open secret that a certain segment of fund
managers, traders and investors use financial astrology, and eventually it will
become mainstream.''
Financial astrology involves using correlations between past market events
and the alignment of the planets, sun and moon to predict market movements. Some
astrologers, including Weingarten, also draw up horoscopes for companies,
currencies and national stock indices based on their first date of trading.
Widely quoted for his predictions, Weingarten is the director of the New
York-based Astro fund under which he manages around $5 million worth of assets
on behalf of clients.
He combines astrological forecasting with traditional fundamental and
technical analysis to form his investment and trading strategy. ``Around 50
percent of what I do is astrology,'' he said.
Technical analysis, where forecasters use graphs of previous market trends to
predict future movements, was once frowned upon but is now a recognized tool for
mapping the markets.
STARGAZING
According to Weingarten, he is not alone in star-gazing to make a profit.
``Ten to 15 percent of professional fund managers use astrology as a secondary
or confirmation tool to trade the markets,'' he told Reuters.
Weingarten says his predictions include the 1990 Tokyo stock market crash and
the 1997 Asian financial crisis. But is his success due to good luck or can
planetary cycles really affect the markets?
David Simpson, a technical analyst at a stockbroking firm who has been
analyzing the financial markets for 40 years, insists there is an effect.
``The Earth is subject to magnetic influences around the clock. The moon and
the sun have the power to move the oceans across many thousands of miles,'' he
said.
``The average human body is made up of at least 87 percent water and is
subject to the same tidal flows. These magnetic attractions cause a chemical and
neurological reaction within the body which changes peoples' perception of black
and white.''
Astrology, says Simpson, holds the key to irrational behavior by investors.
``Company results don't often bear any relationships to share price movements,''
he said.
``People think the share is cheap one day and expensive the next, even though
the price is the same. There's something else going on out there which is
difficult to fathom, but I think I've got fairly close to it.''
There's no doubt financial markets sometimes behave differently from what
economic theory says. Asset prices are supposed to be driven by fundamentals,
but that didn't prevent the bubble in technology stocks in 2000.
Simpson says he foresaw the frantic peak of the Nasdaq stock market in March
2000 six months in advance. He warns there could be further trouble ahead for
stock markets around March 21, the date of the spring equinox.
``I think we are heading for a real nasty crunch and we could see a massive
sell off,'' he said.
But is there any evidence for astrological effects on the markets? Academic
research in the area is hard to find but one investment bank did examine the
subject.
Goldman Sachs published a paper on the impact of eclipses on the financial
markets in August 1999. Using regression analysis, a statistical tool that
measures relationships between data, the bank found a statistical link between
eclipses and the Japanese equity market and U.S. bond yields. But the authors
also found similar correlations using purely random data and so dismissed the
results as spurious.
Even if no evidence of a connection exists, astrology could still have some
effect. This is because, as Weingarten points out, expectations can often become
self-fulfilling.
``Whether or not you believe in astrology, it influences the markets,'' he
said. ``There are very big fund managers in India, Hong Kong, the U.S. and
Europe that follow astrology and, therefore, it's a factor in the market
place.''
MUMBO JUMBO?
But not all market watchers are convinced of incorporating celestial
movements into their analysis. ``There are obvious seasonalities and cycles in
markets but to correlate these with planetary alignments and to establish cause
and effect is hard to do,'' said one technical analyst working for a major
international bank in London. ``I don't see how you can apply a planet to
forecast a market.''
For Simpson, the more skeptics the better. ``Most people think it's mumbo
jumbo and I'm quite happy they should continue in their ignorance. I've got a
lead on the markets and that's what counts.''
One academic at a British university who specializes in financial forecasting
said the use of astrology is more prevalent in London than most people think.
``There are a lot of traders that use certain aspects of astrology than would
care to admit,'' he said.
He said people who trash astrology don't understand it.
``It does not involve straightforward concepts but is more complex. The idea
that a certain positioning of the planets causes the market to crash is
definitely not true. It just means that the probability of something happening
is higher.''
Proving a link between planetary cycles and the markets is difficult, but
that problem applies to all types of empirical research.
``Before we start criticizing astrology, we should look at weakness in
traditional quantitative forecasting. Lots of qualitative interpretation goes
into forecasts,'' he said. ``We are not dealing with an exact science, whether
it's modeling astrological data or economic data.''
Whether astroeconomics starts attracting more followers remains to be seen.
Maybe the answer is in the stars.
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